Market Report: Arriva hitches a ride, FTSE misses the bus

BUYERS CLIMBED aboard Arriva yesterday as talk of a major reorganisation at the bus group gathered speed. The stock travelled 12.5p higher to 402p amid rumours that the company is about to sell its beleaguered car hire division to focus on its transport empire.

Arriva's rise was all the more credible because the overall market was down sharply despite a quarter-point rate cut. Traders whispered of strong interest from a US car giant, with General Motors and Ford firmly in pole position to pay up to pounds 200m.

The car leasing unit, which hires vehicles to business customers, has long been seen as non-core, but its chronic underperformance has hampered Arriva's previous attempts to sell it.

Last year the division, which accounts for over 19 per cent of group sales, was hammered by a fall in used car prices, leading to a 20 per cent collapse in profits to pounds 25.1m.

The performance was so poor that in June Arriva said that the business - the UK's third-largest car leaser - would be gone by December. However, the sale had to be scrapped due to a lack of serious offers. It now looks as if Arriva's management will be able to wipe some egg off their faces with a sale to the acquisitive Yankees.

Proceeds from the mooted disposal will be used to boost Arriva's bus operations. The company already operates 8,000 buses in the UK, Denmark and Holland, and further purchases in Britain and Europe could come along soon.

The market was left waiting at the bus stop as the bears were firmly in the driving seat. The FTSE 100 finished 49.6 points lower at 6,403.4 as concerns over a US rate hike more than offset the domestic monetary loosening. Market watchers said that the blue chips' unease had been compounded by plunging bond markets and by a feeling that we might have reached the bottom of the UK rate cycle.

Invensys was not bothered by any of this. The old BTR Siebe soared 18.25p to 309.25p in high volume as US funds were said to be piling in. There are rumours that the engineer's pounds 2.4bn disposals programme is about to kick off, and the Americans are desperate to get a slice of the action. Invensys has promised to return pounds 1bn to shareholders after the sell-off and overseas investors do not want to be left out.

Standard Chartered was the other blue-chip star, rising 56p to 1,071.5p after Merrill Lynch and Goldman Sachs went very bullish. The brokers like Standard's exposure to the recovering Asian economies.

Unilever benefited from troubles at arch-rival Procter & Gamble and jumped 11.75p to 584.25p. Hopes of corporate action also helped, although rumoured target Reckitt & Colman slipped 11p to 715p.

Returning talk of an overseas bid lifted National Power 6.75p higher to 487.25p. Mining stocks benefited from a leading broker's optimism on metal prices and strong GDP data in Japan.

Rio Tinto drilled a 36.5p advance to 983p, Billiton was 7p higher to 200p, while Lonmin dug a 11p rise to 501p. A rise in crude helped the oils. Shell flared 8.75p higher at 483p amid talk of a pop at BG or Centrica. BP Amoco rose 18.5p to 1,141p.

The rate cut took its toll on the financials. Abbey National fell 16p to 1,302p, while Lloyds TSB plunged 19p to 841p and Halifax paid for its decision not to lower its mortgage rate with a 25.5p fall to 797.5p. Royal Bank of Scotland survived the onslaught and rose 5p to 1,324p on revived hopes of a deal with Barclays, down 31p to 1,840p.

Among the other losers, BAA nosedived 28p to 655p after dull passenger figures and Scottish & Newcastle spilt 26.5p to 726.5p.

The undercard outperformed the senior index on feverish bid talk. The FTSE 250 ended 12.4 points better at 5,797 and the Small Cap finishing 7.4 up at 2,602.8 - its 1999 peak.

ARM Holdings was the pick of the mid cap. The chip-maker surged 92p to 670p on speculation of a bid from the Swedish telecoms giant Ericsson. The company said it had received no approaches. An alternative story was that Morgan Stanley had successfully placed a large chunk of the 24.6 per cent stake in ARM bought after the purchase of Acorn.

Booker remained flat at 95.5p despite talk of a 150p-a-share bid from US giant Wal- Mart or Somerfield. Large disposals are also expected.

Strong results sent plasterboard giant BPB 25.25p higher to 332p. Warburg is targeting 360p.

ED & F Man Group firmed 22.5p to 350p after unveiling plans to focus on financial services at the expense of sugar.

Pilkington jumped 4.5p to 94.5p on vague bid talk, while RMC built a 26p advance to 929p on whispers of an overseas buy and a switch from Tarmac, down 3.25p to 123p.

British Steel rose 6.25p to 149.75p in good volume amid some rumours that a third European player could join its deal with Dutch rival Hoogovens.

First Choice crashed 24p to 181p. The bid from Airtours, down 2p to 519p, has vanished, leaving shareholders with the all-paper merger with Kuoni.

Bid hopes sent Sherwood Group, the bra maker, 4.5p higher to 24.5p, while talk of large acquisition helped textile company Walker Greenbank to jump 6p to 51p.

A heavy profits warning pushed computer group InterX 197.5p lower to 237.5p. Gresham Computing was pessimistic on the second half and shed 24p to 126p, while worries on its finances forced charter group AB Airlines to give up 1.5p to 13.5p.

London Clubs jumped 2p to 145p on persistent rumours of a 200p to 220p management buyout.

Eidos, the Lara Croft computer games group, crumbled 205p to 2,107.5p after the shock resignation of co-founder Stephen Streater.

SEAQ VOLUME: 1.09bn

SEAQ TRADES: 67,695

GILTS INDEX: 105.36 -1.17

IS JARVIS about to unveil a major contract? The highly-regarded rail maintenance group yesterday followed up Wednesday's 37.5p rise with a 7.5p jump to 502.5p. Some cunning traders believe the company has decided to publish results on June 22 - a week later than expected - as it wants to announce a spanking new contract with the data.

The numbers could be overshadowed by news of a deal to upgrade a landmark route such as the West Coast Main Line.

THE CRANE hire group Baldwins Industrial Services soared 19.5p to an all-time peak of 215.5p yesterday after good maiden results. Profits were well above forecasts at pounds 5.4m, and broker Charterhouse upgraded this year's numbers to pounds 6.3m from pounds 6.1m.

Analysts expect further bullish news in the near term. The word is that Baldwins wants to expand its support services and a number of acquisitions could be on the way.